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A proforma invoice is a preliminary, non-binding bill of sale sent to a buyer before a transaction is finalized, typically to confirm details or facilitate customs and advance payment.
A proforma invoice ("pro forma" means "for the sake of form" in Latin) looks similar to a regular invoice but serves a different purpose. It documents the proposed transaction in detail — items, quantities, prices, taxes, shipping terms — before the actual sale is complete. Common uses include: cross-border shipping (customs authorities require proforma invoices to assess duties), advance payment requests (when a deposit is required before work begins), internal approval workflows (when a buyer needs the document to seek budget approval), and confirming details with a buyer before finalizing the order. A proforma invoice is NOT a request for immediate payment and does not enter the seller's receivables. It is replaced by a commercial invoice once the transaction proceeds.
Use a proforma invoice when: (1) shipping goods internationally — for customs declarations, (2) requesting a deposit or advance payment before starting work, (3) the buyer needs documentation to obtain a letter of credit, import permit, or internal budget approval, or (4) confirming the exact details of a complex order before issuing a final commercial invoice.
A COMMERCIAL INVOICE is a final, legally binding bill that creates a receivable. A PROFORMA INVOICE is a preliminary document that does not create a receivable — it confirms details before the transaction is finalized.
A QUOTATION is a price OFFER awaiting buyer acceptance. A PROFORMA INVOICE is more detailed and typically issued AFTER the order is confirmed but BEFORE shipment/delivery, often for customs or advance payment purposes.
An INVOICE is a final demand for payment of a completed transaction. A PROFORMA INVOICE is preliminary documentation and does NOT demand payment — it informs and prepares.
Example: An Indian exporter ships textiles to a US buyer. Before shipment, the exporter issues a proforma invoice PI-2026-007 listing the goods, quantities, FOB Mumbai pricing, and estimated freight — used by US Customs to clear the goods. Once the shipment arrives and the buyer accepts, a final commercial invoice is issued.
No. A proforma invoice is preliminary and non-binding. It does not enter the seller's receivables and cannot be used as a legal demand for payment. The final commercial invoice — issued after the transaction is complete — is the legally binding document.
No. Tax authorities only accept commercial invoices for input tax credit claims (GST/VAT). A proforma invoice cannot be used to claim tax credits because it does not record an actual taxable supply.
Send a proforma invoice when the transaction has not yet been completed but you need formal documentation — for customs, advance payment, or buyer approval. Send a commercial invoice after goods are shipped or services are delivered, demanding payment.
No. They should be numbered separately. Use a distinct prefix for proforma invoices (e.g., "PI-2026-001") and another for commercial invoices (e.g., "INV-2026-001") to avoid confusion in your books and audit trail.
Most customs authorities require a proforma or commercial invoice for clearance. Whether a proforma is acceptable depends on the destination country and shipping method. Check with your freight forwarder for the specific requirements.
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